New York AG Sues Gemini, Genesis, DCG for Defrauding Customers
New York State Attorney General Letitia James is suing cryptocurrency firms Gemini, Genesis, and Digital Currency Group (DCG) on charges of fraud in a lawsuit announced Thursday.
The suit alleges that Genesis and DCG hid $1.1 billion in losses and Gemini lied to investors about its Gemini Earn program.
At the heart of the case against these three crypto companies is Gemini's Earn program, which the lawsuit alleges was marketed as a low-risk investment opportunity for users of the exchange. According to an investigation conducted by the Office of the New York State Attorney General (OAG), Gemini's internal analysis of Genesis's financials indicated that the crypto firm was a risky partner for the Gemini Earn program.
Specifically, the suit alleges Gemini was aware of the under-secured nature of Genesis's loans and that a nearly 60% concentration of those loans was held by Alameda Research, which was the investment firm affiliated with the now-bankrupt crypto exchange FTX. FTX and Alameda Research founder Sam Bankman-Fried is currently on trial for criminal charges related to that crypto exchange's collapse.
Genesis is accused by the attorney general's office of lying to its investors, the public, and Gemini regarding the state of their finances following major losses from borrowers now-defunct Three Arrows Capital and Babel Finance.
Additionally, Genesis is alleged to have told Gemini it regularly audited its borrowers when the firm hadn't done so with Three Arrows Capital in more than two years. The lawsuit points to a specific post on X (formerly Twitter) made by Genesis as an example of a false statement made to the public in which it is claimed, «The Genesis balance sheet is strong and our business is operating
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